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The New State Pension Rules

Published 12/12/2018 10:58:00, by Marina Maher

The State Pension changed on 6 April 2016. If you reach State Pension age on or after that date you’ll get the new State Pension under the new rules. The new State Pension is designed to be simpler than the old system, but there are some complicated change-over arrangements which you need to know about if you’ve already made contributions under the old system.

Under the new system a man born on or after 6 April 1951, or a women born on or after 6 April 1953 must now have 35 years of National Insurance (NI) contributions, used to be 30 years, to qualify for the full state pension. To qualify for any state pension you need 10 years of contributions. You can no longer build up Additional State Pension, and the government has stopped “contracting out”. This is where people pay lower NI contributions, sacrificing the ability to build up additional state pension while contracted out, and pay the money saved into a private or workplace pension.

Key changes to the State Pension
The new State Pension is based on your National Insurance (NI) record alone.

For the current tax year 2018/2019 the new state pension is £164.34 per week

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However you might get more than this if you have built up entitlement to additional state pension under the old system – or less than this if you were ‘contracted out’ of the additional state pension.

To be eligible for the full £164.34 per week you will need 35 years NI record.

How is the new State Pension calculated?
Your NI record as at 6 April 2016 was converted into a ‘starting amount’ under the new State Pension. This won’t be lower than the amount you would have received under the old system.

If your starting amount is higher than the full new State Pension
Under the old system, if you were employed (rather than self-employed) you paid Class 1 National Insurance which entitled you to the Basic State Pension and an Additional State Pension. This Additional State Pension was based on your earnings as well as the National Insurance contributions you had made or been credited with.

If you had built up substantial entitlement to Additional State Pension this might mean that you have already earned a pension under the old system which is worth more than £164.34 a week. If this applies to you, you will get the full new State Pension amount and you’ll also keep any amount above this as a ‘protected payment’ which will increase by inflation. However you won’t be able to build up any more State Pension.

If your starting amount is equal to the full new State Pension
You’ll get the full new State Pension amount but you won’t be able to build up any more State Pension.

If your starting amount is lower than the full new State Pension
This might be because you were ‘contracted out’ of the Additional State Pension.

You can continue to build up your State Pension to the maximum (currently £164.34 per week) up until you reach State Pension age.

You can do this even if you already have 35 years of NI contributions or credits.

What if you have less than 35 years of NI?

To get the full amount, you’ll need to have 35 years worth of NI contributions or credits (known as qualifying years) during your working life. These don’t have to be consecutive years.

If you have less than 35 years of NI contributions or credits, you’ll get an amount based on the number of years you have paid or been credited with NI.

If you have less than 10 years, you won’t normally qualify for any State Pension.

However, the 10 year minimum qualifying period does not apply to certain women who paid married women and widow’s reduced-rate National Insurance contributions.

If you have gained qualifying years in the European Economic Area, Switzerland (or certain bilateral countries which has a social security agreement with the UK), these can be used towards achieving the minimum qualifying period; however, the actual UK State Pension award will normally be based on just the UK qualifying years.

Getting a State Pension statement
It’s a good idea to regularly request a State Pension statement so you can see how much State Pension you’ve built up so far. You can apply for one online or by phone or post. You’ll find Details about how to do this at GOV.UK